Squeezing The Juice

A nice little earner, if you’ve got the energy

It’s all very well Joe Public striving to be more energy efficient in the home, but if the providers keep on putting up their prices doesn’t less for us only become more for them?

By Mark Cantrell

From Housing magazine, November 2013

SHAMELESS might be one way of putting it; badly timed another. But with no discernible sense of irony whatsoever, four of the Big Six energy providers went and hit their customers with whopping price hikes last month [October 2013, when this article was first published] – just in time for Energy Saving Week (21-25 October). Maybe they’re trying to tell us something?

First came SSE, with an 8.2% rise to average household electricity and gas tariffs. Not to be outdone, British Gas leapt in with an 8.4% rise in the price of gas and 10.4% on electricity costs. As Energy Saving Week got underway on 21 October, nPower played its hand, revealing a 9.3% rise in electricity prices and 11.1% for gas. And then, just before Energy Saving Week drew to a close, Scottish Power ‘powered in’ with its own price hikes – gas up 8.5% and the price of electricity up an average 9%. Way to go, guys.

All we need now is for E.ON UK and EDF Energy to step up the price and then the gang’s all here, but at the time of writing, these two firms weren’t playing ball on this bandwagon. All the same, four is sufficient to give some substance to Adam Scorer’s point about the way energy companies “act in the security of the pack”.

Scorer, director of Consumer Focus, said the price hikes only added to the “sense of desperation” among many consumers that energy costs are spiralling “beyond their means”. The organisation has called for greater transparency in the workings of the energy business.

“Rising prices, the complexity of the market and Government policy is creating a crisis of confidence. Two reviews are needed. A competition review to look at the structure of the energy market. A value for money review to ascertain the costs and benefits of government policy,” he said. “Achieving affordable prices at the same time as reducing carbon emissions and meeting our energy needs is just about the most complex trade-off that we face. We need to take stock and see whether we are striking the right balance between affordability, carbon and security.”

The companies have all expressed similar reasons underlying their pricing decisions; increases to wholesale gas and electricity prices, the cost of making use of the National Grid facilities, and those “compulsory environmental and social schemes”, as Scottish Power put it, for such initiatives as the Energy Company Obligation (ECO); keeping investors sweet couldn’t have been further from their minds. Of course.

“The cost of purchasing and delivering energy to homes across Britain has risen significantly this year,” said Scottish Power’s chief executive of energy retail and generation, Neil Clitheroe. “With an increase in costs for delivering compulsory schemes to reduce carbon emissions and improving energy efficiency in homes, we unfortunately have no other option than to pass these on by increasing our prices for customers.”

Whatever the reason, higher prices means more people at risk of fuel poverty, as the charity National Energy Action (NEA) pointed out. “These rises will continue to disproportionately affect those who are poor and vulnerable unless we see urgent action by the Government in the coming weeks and months,” said Jenny Saunders, the organisation’s chief executive. “These price rises are set to be compounded with the pass through in investment costs, adding hugely to consumers’ bills in the short to medium term. While unit costs for energy remain competitive amongst the lowest in Europe, we will continue to have some of the least energy efficient housing stock in Europe without a major step change in investment by central Government.

“NEA estimates that if all suppliers follow suit then Treasury will gain around £150 million additional VAT revenue. We want to see this money recycled, along with revenue from other carbon and environmental taxes, to support a more ambitious national energy efficiency scheme which could for millions as well as reduce the burden on our health service and stimulate local economies.”

Meanwhile, in what can only be described as a ‘Marie Antoinette moment’ (“let them heat cake” you might say), Ian Peters, managing director of residential energy at British Gas sought to take the sting out of his firm’s price rises thus: “Energy efficiency is the best way to keep bills down, and I encourage anyone who has not benefitted from [such measures] to go online and check if they are eligible. On average, insulation can save you around £200 a year. A price rise doesn’t necessarily mean energy bills have to go up too. The amount you pay depends not just on the price, but on how much gas and electricity you use.”

So that’s us told. Don’t go crying to the utility companies when we find ourselves priced out into the cold, just use less gas and electricity. Actually, Peters has a point. When it comes to energy efficiency – less energy consumption, and therefore lower bills, doesn’t have to mean shivering by candlelight.

By and large, according to the Energy Saving Trust (EST), people are willing to muck in with improving energy efficiency, too; not just to take the strain off their wallet, but to do their bit for the climate by reducing carbon emissions. However, the organisation said people are “bamboozled” by the “mixed messaging” that emerges from UK energy debates.

This picture of confusion emerged out of a survey of 2,000 adults carried out by IPSOS Mori on behalf of the EST to mark Energy Saving Week. Among its findings, 26% thought it would be difficult to meet the UK’s energy needs by 2018. More than half (52%) were prepared to do their bit, expressing a willingness to reduce their energy consumption to help the country meet its energy needs in future. Around the same amount had looked at ways to reduce their energy use after hearing or reading about rising energy bills.

But there are factors at work to suppress these positive sentiments; only 18% had looked at ways to reduce their energy consumption after hearing about fracking, or windfarms (20%). In short, you might say consumers are being blown every which way over the course they ought to take.

“People are bamboozled by big debates leading to mixed messages on energy issues like fracking, rising bills, energy demands and wind turbines,” said Philip Sellwood, the EST’s chief executive. “On the one hand, fear around UK energy supply and rising bills is making people want to take action at home and reduce the amount of energy they use, but on the other hand debates on issues like fracking and wind turbines appear to be distracting the public from making meaningful energy efficiency upgrades which could save them even more money.

“While the big picture issues are an important part of the overall debate, we’ve got to focus on the things that strike a chord with people: saving money and guaranteeing we have enough energy for the future. Get these things right and people will take action at home. Pound for pound, using less energy in the first place is by far and away the most cost-effective thing to do and should be the UK’s number one priority.”

Given the latest round of price hikes, the rising cost of living and stagnating incomes, combined with the remorseless rise of fuel poverty, energy efficiency is becoming a pressing issue. For the most part, the focus is on physical means to improve a home’s performance – insulation, airtightness, the latest more efficient hardware, whether it is conventional gas or electrical equipment or renewable tech such as solar, air, or ground source heat pumps – but an often overlooked aspect is behaviour.

Our habits can make a huge difference to our domestic energy consumption, although of course in itself it is no silver bullet; encouraging us to take a long, hard look at our behaviour was part of Energy Saving Week. After decades of low prices and (seemingly) endless energy supplies, we’ve got rather used to our ‘profligate’ habits; it’s time to become mindful once again that sitting in front of the telly in shorts and t-shirt during the freezing heights of winter is not, well, normal.

Time, then, to take a leaf out of our stalwart and more economically minded grandparents’ generation. We don’t have to be cold – jumpers were invented for a reason – but we don’t need to turn up the heat either.

But, for all they preach the lessons of energy efficiency, and encourage us to use less gas and electricity, can we really expect the Big Six to sit back quietly and accept this reduction in consumption? After all, we’re talking about their revenues here – and the energy boys certainly have the power to extract the shortfall from our beleaguered wallets.

Well, it’s something to ponder as the dark nights draw in and the mercury levels fall.

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Spending habits

  • Only turn the lights on when you need them, and consider swapping ageing light bulbs – those old tungsten filament jobbies – for energy saving bulbs. This could save £3 a year per bulb. Not much, maybe, but it adds up
  • Don’t leave televisions and electronic gear, computers or DVD players for example, on standby – switch them off at the mains or unplug them. Ensure children do the same for games consoles and computers in their rooms. Also, don’t leave phones on charge overnight
  • Consider buying an intelligent mains controller so that all equipment linked to the TV is automatically turned off with the TV. Alternatively, plug devices into a extension lead with switches on each individual sockets so that devices can be turned off separately when not in use, while leaving others active – such as digital TV recorders
  • Don’t use the TV to access digital radio; it uses more energy than a radio
  • Check the settings on the TV. The brighter the screen, the more energy it is using. According to the EST, the factory settings on TVs are usually set too bright for home use
  • Draw the curtains at dusk to keep the heat in. Close internal doors to keep heat in the rooms being used, and turn radiators off in unused rooms. Consider putting on an extra layer of clothing before turning up the heating
  • In the cold weather, set the heating to switch off a short while before going to bed, and then switch on before getting up in the morning. Use a high tog duvet and keep some blankets by the bed to adjust the temperature during the night
  • Use a hot water bottle to warm the bed rather than an electric blanket
  • Draft excluders can be a low cost means of preventing heat being lost through doors on draughty old homes
  • In the kitchen, only boil the water you need in the kettle
  • Use the right sized hob and pan for the job. Keep the oven door shut as much as possible
  • Cut food into smaller pieces to reduce cooking time
  • Keep the lids on the pans as much as possible to keep heat in, turn the hob down when it begins to boil
  • Defrost food in the fridge overnight rather than using the microwave
  • Don’t keep the fridge or freezer door open longer than necessary
(Source: Energy Saving Trust)

This article first appeared in the November 2013 print edition of Housing magazine. It was subsequently republished on the Housing Excellence website, 27 March 2014

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